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Smith v. U.S. Department of Education

United States District Court, N.D. Indiana, Fort Wayne Division

August 27, 2019

CONDRA SMITH, Plaintiff,
U.S. DEPARTMENT OF EDUCATION, et al., Defendants.



         Plaintiff Condra Smith has sued the United States Department of Education, United Student Aid Funds (“USA Funds”), Pioneer Credit Recovery, Inc. (“PCR”), and General Revenue Corporation (“GRC”). In the controlling pleading, the Amended Complaint [ECF No. 48], Plaintiff alleges that she was the victim of fraudulent activity while attending Indiana State University. According to Plaintiff, she did not authorize Perkins or Stafford loans to be obtained in her name, and her signatures do not appear on the relevant documents for obtaining the loans. Yet, Defendants are collecting on these fraudulent loans through garnishment of her wages. Additionally, the Department of Education has withheld money from her tax returns. She seeks repayment of the withheld wages and tax return, as well as damages.

         All Defendants moved for summary judgment. Plaintiff filed a Response, in which she embedded her own motion for summary judgment. Defendants filed a Reply, which was titled as Defendants' Consolidated Reply in Support of Motion for Summary Judgment on the Administrative Record and Brief in Opposition to Plaintiff's Motion for Summary Judgment. Plaintiff's response, as well as her own motion for summary judgment, are devoid of any supporting evidence.[1] For reasons stated more fully below, the Court will grant summary judgment in favor of the Defendants and will dismiss the claims for monetary damages.


         Smith attended Indiana State University between fall 2002 and spring 2006. (ED's Certified Administrative Record (ED R.), ECF No. 55.) During this time, she paid for her education with a combination of scholarships, Pell Grants, cash payments, and student loans. (ED R. at 11-15) Among these student loans were a collection of Stafford loans taken out under the Federal Family Education Loan Program pursuant to a Federal Stafford Loan Master Promissory Note dated January 3, 2004 (the “Promissory Note”). (ED R. at 11-15, 62.) The Promissory Note included language that would permit multiple loans to be made under the Note. The guarantor of the loans is USA Funds. Additional loan authorizations were made pursuant to the Promissory Note in subsequent years; Plaintiff authorized these amounts and received notices each semester notifying her of the disbursements. (ED R. at 11-15, 31-41.) Plaintiff also received and was provided written acknowledgement of several Perkins loans during her time at Indiana State. (ED R. at 43-56.)

         In 2017, PCR, acting in its capacity as an authorized representative for USA Funds, issued a notice to Plaintiff that her wages would be subject to garnishment to satisfy her defaulted loans. (ECMC Administrative Wage Garnishment Record (WG R.), ECF No. 56.) Plaintiff requested a hearing on grounds that she believed someone at Indiana State University signed her name on the loan application and promissory note without her permission. She requested an application for discharge of her debt. After an administrative hearing, the hearing officer concluded that Plaintiff had failed to demonstrate that the loans in question were not valid or that USA Funds or PCR acted improperly in pursuing garnishment of Plaintiff's wages.

         On August 31, 2018, Plaintiff filed a formal Loan Discharge Application: False Certification to USA Funds seeking a discharge of her loans based on alleged unauthorized signatures on the applications and promissory note. An investigation was conducted, with the conclusion that the loans were authentically Plaintiffs. When Plaintiff was notified of the decision, she requested that the Department of Education review USA Funds' decision.

         The Department of Education reviewed the allegations and related documents. It concluded that Plaintiff did not qualify for a loan discharge:

         After a thorough review of your application, the U.S. Department of Education (ED) has upheld USA Funds' determination that you do not qualify for false certification loan discharge (unauthorized signature/payment) for the following reasons:

• You have provided no collaborating evidence that your name was signed fraudulently on your Federal Family Education Loan Program (FFELP) Federal Stafford Loan Master Promissory Notice on January 4, 2003.
• The promissory note contains several items of information that assist in confirming your identity and by extension your relationship to the loans: name, address, social security number, date of birth and references.
• The Account Summary by Term you provided USA Funds shows that you received FFEL Stafford student loans and federal Perkins student loans that Indiana State University currently holds.
• ED received the enclosed documents from Indiana State University (ISU) Student Financial Aid Office that shows you received Federal Stafford Loans while you attended ISU. You indicated on the Office of Student Financial Aid Federal Stafford Loan Information Form 2004-2005 that you were not a first-time Stafford Loan borrower at ISU and you requested that ISU use the same lender for your federal student loans. Copies of the notices sent to you informing you of your Federal Stafford Loan disbursements dated: August 18, 2003, August 18, 2003, January 3, 2004, April 27, 2004, July 17, 2004, July 21, 2004, July 21, 2004, August 6, 004, August 16, 2004, January 3, 2005, and July 6, 2005. Ten of the financial aid notices were sent to your home address and one notice sent to your mail box at ISU.
This indicates that you were the beneficiary of the loan(s) proceeds to pay for your education. ED has concluded, based on the preponderance of evidence that these loan(s) are authentically yours. As a result of this determination, you ...

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